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Wednesday, 16 September 2009

Ghana:What NPP Did With $750m Eurobond

The National Democratic Congress government is at it again. When the opposition in Parliament raised concerns about how government was to spend the supplementary budget request made last week, government responded by alleging fraud in the disbursement of the $750 million that the previous government raised last year from the international capital market through the issuance of sovereign bonds – the first of its kind by this country.

This week about four pro-government newspapers have published frontpage stories on the Eurobond with one screaming ‘FRAUD’! But, documents sighted by The Statesman points to a different story given to the World Bank and the International Monetary Fund by the NDC in the Ghanaian government’s quest to gain credit facilities from the two multilateral institutions.

According to the World Bank document of June 15, 2009, covering the $300 million Economic Governance and Poverty Reduction Credit for Ghana, “The information provided by the Government of Ghana confirms therefore that the proceeds from the Eurobonds were used for productive investments, primarily in electricity generation and distribution…” Indeed, the World Bank confirms that these “two areas that had been identified in the 2007 CEM as warranting additional investments to sustain economic growth.” Ghana registered a record high economic growth of 7.3 percent, in spite of the global financial crisis.

The record hikes in crude oil prices of 2008, coming on top of the low water levels at the Akosombo Dam in 2007 meant that government had to be spend extra money in buying crude oil to feed the thermal plants for electricity generation. In fact, for the first six months of 2008, over $1.2 billion was spent on importing crude oil. Only a third of that was used this year. But the expenditure was deemed necessary to support industry and economic activity in general, which posted big growth last year.

At paragraph of the June 15 World Bank document, the details of what the $750m was used for are spelt out. What they show is that by the time the NDC took over in January 2009, $155 million of the Eurobond funds were still lodged at the Bank of Ghana to be spent. While the NDC is focusing on how the New Patriotic Party spent the first $595 million, Ghanaians are yet to be told what has happened to the $155m.

According to the World Bank document, “Non concessional borrowing in 2007 was mostly used to raise energy capacity and that of 2008 is being assessed. Out of the US$750 millions borrowed in 2007 in the form of Eurobonds, US$595 millions had been disbursed by January 2009.” It goes on to give the details:

“The proceeds were allocated primarily to support public investments in the energy sector according to the following distribution: US$286 million for investments by the Volta River Authority (VRA); US$134 million for investments by the Electricity Company of Ghana (ECG); US$54 million for the investment in the Bui Dam; US$ 31 million for the Government’s equity investment in the West Africa Gas Pipeline (WAGP); and US$90 million for public investments in road infrastructure.”

It adds, “The information provided by the Government of Ghana confirms therefore that the proceeds from the Eurobonds were used for productive investments, primarily in electricity generation and distribution.” In 2008, the Government contracted five new non concessional loans, for a total amount equivalent to US$585 million. The main factor driving the decision to borrow on a non concessional basis in 2008 was the need to continue ongoing public investment projects in key sectors, notably in the energy and water and sanitation sectors.

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